For some years now, the business environment, world trade, and supply chains have been facing a series of challenges: inflation, bureaucracy, blockades, high commissions, and geopolitical conflicts, among others. Because these challenges generate some uncertainty, companies (generally the newest and smallest) seek more efficient and modern financial solutions offered by Fintech, especially in aspects where traditional banks have certain limitations. Next, we will learn about factors that cause companies to look to Fintech for more efficient financial solutions.
Digital and automated processes
Carrying out procedures in a traditional way (either manually or through physical documents) has been a cumbersome and problematic process, however; currently, many companies worldwide have most of their processes digitized; however, when entering the global trade through financial transactions/operations, a big problem arises, because this system is still outdated in terms of automating its payment processes or financial operations globally.
In this way, companies are forced to resort to Fintech since, thanks to their technology; they can achieve solutions that eliminate many of the problems caused by traditional banking: high commissions, long times, bureaucratic procedures, etc. Tools like the blockchain, artificial intelligence, and cloud storage allow for safer and more efficient financial operations.
A clear example of this is the continuous global expansion of Open Banking, which consists of opening up traditional banking systems through technology and more open or transparent standards. Instead of a client’s financial information being restricted to a single bank. Open Banking allows users to share their information with other financial institutions or providers, such as financial management applications, Fintech, or payment companies.
Funding sources
Rising central bank interest rates cause the cost of commercial bank credit to rise significantly, making it difficult for many small/medium-sized businesses to access credit. This has caused many companies and businesses to resort to alternative means of financing, such as Fintech, due to their low commissions and flexibility in their processes and requirements.
Sustainable business practices
Currently, more companies are interested in carrying out sustainable business practices. For example, according to an Accenture study titled “Find Your Competitive Advantage in Trade Finance,” 80% of companies surveyed have at least one environmental policy applied throughout their supply chains. Because of this, companies analyze each link in their supply chain to ensure that their entire production scheme, including the financial one, respects the environment. They have found an important ally in Fintech (through sustainable finance), as many Fintech implement innovative products that reward “green” practices and provide robust data to track the sustainability of their finance solutions.
Try new financial products
Due to the rise of social platforms and the growth of the commerce and financial ecosystem, many companies constantly evaluate and test new financial products and services, even when receiving said products/services from their traditional banks. Many factors cause this exploration; one of these factors is that social networks have allowed the experience of their users to improve, which makes the company or business want to have the “same experience” in their financial product or service.
Another reason is when payments or transfers must be made in countries or areas with certain obstacles, such as high commissions, high bureaucracy, or geopolitical problems, which makes the company explore other more efficient alternatives in the market. In this way, companies tend to satisfy these needs with the services offered by Fintechs since they offer various innovative financial solutions adapted to the local environment, which allows companies to optimize their processes and solve their problems.
What do you think about this topic? Do you want to know more about Fintech?
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